The Morning Call
7/18/22
The
Market
Technical
The good news is
that the S&P failed in its challenge of the lower boundary of its
intermediate term uptrend for the third time last week. Plus, it still has a
huge gap down open that needs to be filled. The bad news is that it remains (1)
below both DMA’s, (2) in a short term downtrend, (3) in a very short term
downtrend, (4) on Friday it made a gap up open that will likely be closed, and
it (5) has yet to make a higher high. Visually you can see the developing wedge
pattern formed by the upper boundary of
its very short term downtrend and the lower boundary of its intermediate term
uptrend. Until that pattern is completed/resolved, patience is the word.
The long bond failed
its third challenge of the lower boundary of its intermediate term trading
range and is now rallying somewhat weakly. But as I said last week, as investor
concern about recession escalates, the odds of lower bond prices diminish.
Gold prices
continued to plunge in spite of a rally in bond prices. The good news (I guess)
is that is nearing several support levels. Let’s see how it handles them. This
is not the time to be buying.
The
story remains the same---up, up and away. My conclusion is unchanged: no matter
how badly everyone wants the dollar to go down, as long as the globe looks at
the US as the safest place to invest, the uptrend is not apt to change. As you
can read below, technicians are starting to predict a top. However, in the
articles on the Eurodollar further down, fundamentals are not supporting that
notion.
The
dollar and stocks.
https://allstarcharts.com/what-will-it-take-bear22/
Beginning of the
end?
https://www.zerohedge.com/markets/beginning-end-dollars-irrepressible-rally
Friday in the
charts.
When
bubbles fo bust.
https://thefelderreport.com/2022/07/13/when-bubbles-go-bust/
Fundamental
Headlines
The
Economy
Review of last Week
The US economic data
continued its dismal path; the numbers
were negative as were the primary indicators (one plus, one neutral, two minus).
Overseas, the stats were mixed.
The main features of
the US data were higher inflation and slower economic growth---which, of
course, are the two issues that everyone is grappling with. Which is the larger
problem, just how big a problem is it and how will it impact the
economy/Markets?
As you know, I recently
revised my outlook---
(1) that we are at or
near peak inflation. Unfortunately, we don’t know how deeply embedded that inflation
is: have all the recent exogenous events
[covid, Ukraine, China] made this a temporary phenomenon or has the prolonged
period and the magnitude of monetary ease created a structural problem making a
return to a lower stable inflation rate and a return to the Market determining
the price of risk impossible absent the application of some pretty harsh
medicine from the Fed?,
(2) and that we are
already in or soon will be in a recession. And that raises the more important issue:
how long Fed policy needs to and will remain tight. How long it needs to stay
tight is dependent on the answer to the above question. How long it will stay
tight depends on its courage.
Unfortunately, the turd in punch bowl is that the
Fed does not have well documented history of courage. To be sure, Powell has
been firm in his public commitment to squash inflation. And if that proves to
be the case, then if inflation is deeply embedded in the economy, the resulting
recession is apt to be a painful experience---certainly more so than the
majority of the public narrative implies.
All of that said,
there is a heavy element of uncertainty in that analysis because we do not know
how deeply embedded inflation is and we can’t say for sure that Powell won’t
stand as tough as he says that he will.
But Eurodollar spreads are telling us
that deflation is the worry.
https://www.zerohedge.com/markets/unprecedented-warning-about-leaping-frying-pan
And here is why.
Which leaves the
outlook for the economy and, more importantly for investors’ purposes,
corporate profits murky at best. The good news is that second quarter earnings
season has started though so far it has been somewhat disappointing.
Patience is virtue.
US
International
Other
Update
on big four economic indicators.
Recession
Recession already here?
https://www.zerohedge.com/markets/recession-may-already-be-here
Geopolitics
Gazprom reportedly declares force majeure
China
China’s economy hits a slump.
https://www.nytimes.com/2022/07/14/business/economy/china-economy-slows.html
News on Stocks in Our Portfolios
Qualcomm (NASDAQ:QCOM) declares $0.75/share quarterly dividend, in line with previous.
What
I am reading today
Never bring white wine
to cookout.
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for Survival’s website (http://investingforsurvival.com/home)
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